Corporate Groups

German and Nordic Perspectives on Corporate and Capital Market Law 157-200 (Holger Fleischer, Jesper Lau Hansen & Wolf Georg Ringe eds., 2015)

SAFE Working Paper No. 66

44 Pages Posted: 23 Sep 2014 Last revised: 31 May 2016

See all articles by Tobias H. Troeger

Tobias H. Troeger

Leibniz Institute for Financial Research SAFE; European Corporate Governance Institute (ECGI); European Banking Institute

Date Written: September 22, 2014


This paper contrasts the recent European initiatives on regulating corporate groups with alternative approaches to the phenomenon. In doing so it pays particular regard to the German codified law on corporate groups as the polar opposite to the piecemeal approach favored by E.U. legislation.

It finds that the European Commission’s proposal to submit (significant) related party transactions to enhanced transparency, outside fairness review, and ex ante shareholder approval is both flawed in its design and based on contestable assumptions on informed voting of institutional investors. In particular, the contemplated exemption for transactions with wholly owned subsidiaries allows controlling shareholders to circumvent the rule extensively. Moreover, vesting voting rights with (institutional) investors will not lead to the informed assessment that is hoped for, because these investors will rationally abstain from active monitoring and rely on proxy advisory firms instead whose competency to analyze non-routine significant related party transactions is questionable.

The paper further delineates that the proposed recognition of an overriding interest of the group requires strong counterbalances to adequately protect minority shareholders and creditors. Hence, if the Commission choses to go down this route it might end up with a comprehensive regulation that is akin to the unpopular Ninth Company Law Directive in spirit, though not in content. The latter prediction is corroborated by the pertinent parts of the proposal for a European Model Company Act.

Keywords: Corporate Groups, Related Party Transactions, Tunneling, Corporate Governance, E.U. Corporate Law, Shareholder Rights Directive, Group Interesterest, Minority Shareholder Protection, Creditor Protection

JEL Classification: D23, D62, K22

Suggested Citation

Tröger, Tobias Hans, Corporate Groups (September 22, 2014). German and Nordic Perspectives on Corporate and Capital Market Law 157-200 (Holger Fleischer, Jesper Lau Hansen & Wolf Georg Ringe eds., 2015), SAFE Working Paper No. 66, Available at SSRN: or

Tobias Hans Tröger (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
+49 69 798 34391 (Phone)
+49 69 798 34536 (Fax)


European Corporate Governance Institute (ECGI) ( email )

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European Banking Institute ( email )


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